* France's Total is Novatek's main partner for Yamal LNG
(Adds detail, background)

By Barbara Lewis and Francesco Guarascio

BRUSSELS, July 23 The European Union should not
give Russia technical help to develop Arctic oil and gas fields
if Moscow fails to help to defuse the Ukraine crisis, EU Energy
Commissioner Guenther Oettinger said on Wednesday.

EU officials have always said energy should not be used as a
weapon in attempts to solve the crisis over Russia's actions in
Ukraine.

While stopping far short of targeting physical energy
supplies, EU ministers for the first time this week raised the
idea of restricting Russian access to oil and gas technology.

"If they don't try for peace in the east of Ukraine ... If
they don't decisively try to do something to prevent escalation,
then there is no reason for us to help promote the growth of
their industry and develop new resources for gas and oil and
therefore to put this equipment on the list of sanctions,"
Oettinger told a news conference.

"The Russians see offshore oil and gas in the Arctic, for
example, as a good potential for the future. But this can only
be developed by hardware and software from the West, by drills
and ... equipment that their industry cannot supply."

A western halt in supporting Russia's ambitious Arctic oil
and gas developments could deal a blow to Russian gas company
Novatek, the country's second biggest gas producer
after state-controlled Gazprom.

Novatek, which has seen one of its shareholders hit by U.S.
sanctions, is the main developer of the Arctic Yamal peninsula
liquefied natural gas (LNG) export project.

Novatek's Yamal LNG project, which plans to export 16.5
million tonnes of LNG a year, is so far in the Arctic North that
it requires the use of specialised technology, often provided by
western partners.

Novatek's main partners in the project are France's Total
and China's CNPC.

"We are closely monitoring the situation and the sanctions
imposed on our partner Novatek. We are analysing the possible
impacts on our ongoing projects in Russia to maintain the
current planning," a spokesman for Total said.

EU GETTING TOUGH?

Oettinger made his comments on the same day German
Chancellor Angela Merkel said it was time for Europe to
implement new sanctions against Russia, and as government
officials in Berlin said her position was getting closer to that
of Washington, which has advocated stricter sanctions than the
EU.

Oettinger said, however, that he did not support putting
sanctions on energy from Russia, the EU's main supplier.

"I've always argued in favour of the fact that energy
supplies from Russia - oil, gas, uranium etc - should not be
included on lists of sanctions," he said.

The European Union threatened Russia on Tuesday with harsher
sanctions over Ukraine following the downing of a Malaysian
airliner.

EU foreign ministers asked officials on Tuesday to present
proposals on Thursday for restricting Russia's access to
European capital markets, weaponry and sensitive technologies,
including in the energy sector.

Sanctions in these areas could be imposed if Moscow does not
cooperate in the Malaysia plane crash probe and stop arms
flowing across the border to pro-Russian rebels in eastern
Ukraine.

Analysts said sensitive energy technology could also include
tight oil fracking technology and banning finance and advisory
firms from working with targeted Russian energy projects.

"Most major Russian gas projects are working closely with
several European banks and consultancies, so if we get targeted
that would at least delay Russia's biggest projects in terms of
due diligence and project finance completion," one advisory
source said. "And delays cost a lot of money in this business."

International sanctions on Iran brought Tehran to the
negotiating table over its nuclear programme.

The EU Iran sanctions covered equipment and technology for
the oil and gas industries and drilling and production platforms
as well as energy imports.

While it is possible the EU will agree on restricting
Russia's access to energy technology, banning energy imports,
which account for about a third of EU energy use, would be
extremely hard to agree.

Such a ban would strike at the heart of Russia's finances,
but could also push EU members, just emerging from economic
downturn, back into recession, EU diplomats say.

Some EU nations are 100 percent dependent on Russian gas,
with no alternative suppliers, and Italy and Germany are
Russia's biggest buyers in volume terms.
(Additional reporting by Henning Gloystein in London and Michel
Rose in Paris; editing by Adrian Croft and William Hardy)

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